MasterCard 2008 Annual Report Download - page 129

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except percent and per share data)
FIN 48
On July 13, 2006, the FASB issued FIN 48. The adoption of FIN 48 on January 1, 2007 required the
Company to inventory, evaluate, and measure all uncertain tax positions taken or to be taken on tax returns, and
to record liabilities for the amount of such positions that would not be sustained, or would only partially be
sustained, upon examination by the relevant taxing authorities.
A reconciliation of beginning and ending tax benefits for the years ended December 31, is as follows:
2008 2007
Beginning balance ....................................... $134,826 $109,476
Additions:
Current year tax positions ................................. 20,447 40,288
Prior year tax positions ................................... 15,654 4,544
Reductions:
Prior year tax positions, due to changes in judgments ........... (2,613) (4,886)
Settlements with tax authorities ............................ (1,397) (11,990)
Expired statute of limitations .............................. (3,732) (2,606)
Ending balance ......................................... $163,185 $134,826
The entire balance of $163,185 of unrecognized tax benefits, if recognized, would affect the effective tax
rate. There are no positions for which it is reasonably possible that the total amounts of unrecognized tax benefits
will increase or decrease significantly within the next twelve months.
The Company is subject to tax in the United States, Belgium and various state and other foreign
jurisdictions. With few exceptions, the Company is no longer subject to federal, state, local and foreign
examinations by tax authorities for years before 2001.
It is the Company’s policy to account for interest expense related to income tax matters as interest expense
in its statement of operations, and to include penalties related to income tax matters in the income tax provision.
At December 31, 2008 and 2007, the Company had recognized net interest payable of $14,014 and $5,897,
respectively, in its consolidated balance sheets. For the years ended December 31, 2008 and 2007, the Company
recorded interest expense of $8,118 and $800, respectively, in its consolidated statements of operations. At
December 31, 2008 and 2007, the Company had recognized $2,609, respectively, of penalties payable in its
consolidated balance sheets.
Note 20. Legal and Regulatory Proceedings
MasterCard is a party to legal and regulatory proceedings with respect to a variety of matters in the ordinary
course of business. Some of these proceedings involve complex claims that are subject to substantial
uncertainties and unascertainable damages. Therefore, the probability of loss and an estimation of damages are
not possible to ascertain at present. Accordingly, except as discussed below, MasterCard has not established
reserves for any of these proceedings. MasterCard has recorded liabilities for certain legal proceedings which
have been settled through contractual agreements. Except for those matters described below, MasterCard does
not believe that any legal or regulatory proceedings to which it is a party would have a material impact on its
results of operations, financial position, or cash flows. Although MasterCard believes that it has strong defenses
for the litigations and regulatory proceedings described below, it could in the future incur judgments or fines,
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